Central banks for Europe and for the United Kingdom are also set to announce their latest increases for rates this week.
Beyond interest rates, more than 100 companies in the S&P 500 are scheduled this week to report how much profit they made in the last three months of 2022. Among them are tech heavyweights Apple, Amazon, and Google’s parent company. Because these companies are three of the four biggest on Wall Street by market value, their stock movements carry much more sway on the S&P 500 than others.
Apple’s 1.4 per cent drop Monday, for example, was one of the heaviest weights on the S&P 500.
The only other stock that rivals them in size, Microsoft, shook Wall Street last week when it gave forecasts for upcoming results that raised worries about a slowdown in corporate spending on tech. Its stock fell 1.8 per cent Monday.
Companies generally look to be on track to report slightly weaker profit for the end of 2022 than expected, according to a BofA Global Research report. That’s an indication that the strong January enjoyed by the S&P 500 so far is more about improving sentiment on Wall Street than about better fundamentals, strategist Savita Subramanian wrote.
Strategists at Morgan Stanley led by Michael Wilson warn tougher times may be ahead.
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“The reality is that earnings are proving to be even worse than feared based on the data, especially as it relates to margins,” they wrote in a report. “Secondly, investors seem to have forgotten the cardinal rule of ‘Don’t Fight the Fed’. Perhaps this week will serve as a reminder.”
Later this week, the U.S. government will also give its latest monthly update on the job market. Hiring has remained remarkably resilient across the broad economy, even as housing and other corners weaken sharply under the weight of all the Fed’s rate hikes from last year.
Some big tech companies have announced high-profile layoffs after acknowledging they misread their boom coming out of the pandemic. But job cuts may be starting to spread to other areas of the economy. Hasbro and 3M last week announced layoffs.
All told, economists expect Friday’s report to show that U.S. employers added 187,500 more jobs than they cut during January. That would be a slowdown from December’s hiring of 223,000.
The yield on the 10-year Treasury rose to 3.54 per cent from 3.51 per cent late Friday. The two-year yield, which tends to move more on expectations of Fed actions, rose to 4.29 per cent from 4.20 per cent.
AP
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